Building a Public Energy Commons

Ashley Dawson reviews Stephen Maher and Scott Aquanno’s “The Fall and Rise of American Finance” and Brett Christophers’s “The Price Is Wrong.”

By Ashley DawsonAugust 6, 2024

• Politics

• Economics and Finance

• Environment

CLIMATE ACTIVISTS in New York have fought hard in recent years to ensure that the state has one of the nation’s most ambitious decarbonization plans. In 2019, a large and diverse coalition of groups won passage of the landmark Climate Leadership and Community Protection Act (a.k.a. the Climate Act), which commits the state to reaching 70 percent renewable energy by 2030 and 100 percent clean power by 2040. Last year, the Public Power NY campaign (of which I am a member) successfully pushed legislators to pass the Build Public Renewables Act, which authorizes the New York Power Authority—the nation’s largest such entity—to build renewable energy projects to help reach the state’s climate goals.

But New York’s transition to renewable energy is flagging. In April, a number of the state’s signature offshore wind projects were scrapped. This came after 66 percent of the state’s land-based renewables projects went belly-up the previous year. Underlining the depth of the setback to New York’s decarbonization plans, state officials recently acknowledged that New York will miss its statutory “70 by 30” goal by at least three years.

This admission was not a surprise to climate and energy activists, who have watched with mounting alarm as the state’s progress on renewables has cratered. Since 2017, the state’s share of renewable energy has increased less than one percent. This is far more than a local crisis: wind power in the US Northeast, for example, is a linchpin in federal plans to clean up the nation’s energy grid, with the Biden administration hoping to generate 30 gigawatts from offshore wind by 2030.

The crisis in the renewable energy buildout comes at a pivotal moment. For the first time, according to the European Union’s climate service, global warming has exceeded 1.5 degrees Celsius across an entire year. The earth is currently sweltering through the hottest days ever recorded. As I write these lines, the Park Fire—already one of California’s biggest wildfires ever—burns uncontained, incinerating hundreds of thousands of acres and generating unprecedentedly strange phenomena like fire tornadoes and smoke thunderclouds.

The primary driver of this increasingly deadly warming is the combustion of fossil fuels to generate electricity. Hence, there is broad agreement among climate and energy experts that the world must electrify everything, from transportation to the heating and cooling of buildings to most industrial production. But most members of the public do not yet understand the urgency of this issue. Even among climate activists, more energy tends to be focused on decrying the stampede toward fossil fuel expansion than on building out renewable alternatives.

Why has there been so little progress towards decarbonization in a progressive state like New York? For many years, renewable energy was more expensive than energy derived from fossil fuels, making energy transition appear to be an economic nonstarter. But about a decade ago, the cost of power from renewables and fossil fuels reached parity, and clean power now tends to be cheaper than forms of dirty energy like coal. This ought to be a game-changer—after all, pundits have told us for years that the falling cost of renewable energy will mean less fossil fuels since renewables will be more profitable to develop than dirty-energy sources.

But it turns out that cheap power is not all that attractive to investors. As New York state senator Julia Salazar and assembly member Sarahana Shrestha argue in a recent opinion essay, the “fundamental problem is that the state is currently relying entirely on private developers to build renewables—but they will build only if they can make a hefty profit.” In recent years, a mix of inflation, supply chain issues, and an outdated grid system designed for fossil fuels has meant that building renewables isn’t profitable enough for investors. As a result, not only have new capacity additions dwindled, but many private developers have also walked away from contracts they signed with the state to build wind and solar power, bringing New York’s progress toward climate goals grinding to a halt.

Brett Christophers’s new book The Price Is Wrong: Why Capitalism Won’t Save the Planet provides extensive empirical support for Salazar and Shrestha’s damning take on the policy of relying on the private sector for energy transition. As the title of his book suggests, Christophers dismantles one of the most disastrously incorrect dogmas of the neoliberal era—the tired claim that the free market is the most effective way of allocating social resources. As he demonstrates, the notion that the falling price of renewable forms of energy like solar and wind power will lead automatically to higher profits for private-sector developers, and consequently to more investment in the sector, is pure fantasy. Christophers conclusively shows that neither of these oft-repeated ideas about energy markets is true.

Among the reasons for the failure of a private-sector-driven energy transition, according to Christophers, is the highly competitive character of the renewables sector. Cutthroat competition tends to depress profits. Although this competition is, to a certain extent, an inherent element of capitalist economies, it is worth noting that it has also been stimulated to a significant degree by the state. In EU countries, for example, a system of procurement auctions was rolled out in the mid-2010s; in this system, bidders compete to win contracts (sometimes known as power purchase agreements) to deliver a certain amount of the energy that state authorities offer up for auction. The goal is to provide contracts to those bidders who can deliver renewable electricity at the lowest possible cost. The auction system has squeezed out community-based energy cooperatives across the European Union, since these groups cannot promise the rock-bottom energy-generation prices that characterize the bids from big conglomerates. This might have been a necessary loss since the auction system was supposed to benefit the public in general by driving down energy prices. However, as Sean Sweeney, John Treat, and Irene Hongping Shen of Trade Unions for Energy Democracy have documented, adoption of the procurement auction system across the EU and abroad has led to a dramatic slowdown—and, in some cases, to a complete crash—in the deployment of renewables. As the bidding system led to tighter profit margins, investment in renewable energy fell off a cliff. The failure of the market-based auction system to drive a build-out of renewables is a perfect illustration of the arguments of public power advocates.

Christophers also points out that the volatility of deregulated energy markets makes profits extremely difficult to predict. Such uncertainty tends to discourage investment in renewables. Beyond these specific dynamics of energy markets, however, the basic problem is capitalism itself. After all, a capitalist marketplace is defined by two key factors: private ownership of the means of production and the profit imperative. The basic problem for capital is, as David Harvey has put it, to find a way to produce a minimum three-percent compound growth rate forever. Capitalism is thrown into crisis if growth rates fall below this threshold. This means that the capitalist system ultimately is not interested in halting the climate emergency but merely in wringing the greatest profits out of the world as it burns.

Without significant state subsidies, renewables simply cannot generate attractive profit rates. The result is flagging investment in renewables. As Christophers puts it in a foundational argument strikingly in line with those of public-power advocates in New York:

The main economic reason why the decarbonization of electricity is progressing so much slower than we need it to […] is that most governments worldwide have effectively outsourced responsibility for developing, owning and operating solar and wind farms to profit-oriented private sector actors, and yet the profits that such actors expect to be able to earn from investment in these activities generally underwhelm. It is simply not a sufficiently attractive economic proposition.

Who is actually making the decisions about whether to build a wind farm or a utility-scale solar project? My account thus far has suggested that investors in for-profit renewable energy companies are the ones who often pull the plug on such projects when they don’t appear lucrative enough. But the system of public-private partnership that has become dominant over the last decade or two ensures that another set of players is sitting at the energy transition table: big banks. Finance capital is involved with decisions about renewables projects because, unlike companies in other industrial sectors (particularly fossil fuels), renewable energy companies generally don’t have enough capital on hand to build a new solar or wind farm. Since they don’t have the luxury of funding major fresh capital expenditures out of their operating cash flows (which, as we have seen, tend to be relatively meager), companies that are not themselves particularly profitable must find another source for investment capital. That source tends to be finance capital.

Notwithstanding public pronouncements about going green, finance capital isn’t interested in renewable energy for altruistic reasons. Under renewables subsidy schemes like the Biden administration’s 2022 Inflation Reduction Act (and the Obama-era subsidies on which it is modeled), developers are awarded tax rebates for developing utility-scale renewables projects. They trade these tax rebates to big banks in exchange for the large amounts of up-front capital required to build these projects. Known as “tax equity finance,” this arrangement effectively allows big banks to decide where and when renewable energy projects will be built. Consequently, as Christophers explains, the calculus that determines whether we stop polluting the planet is quite literally whether renewables projects are considered “bankable.”

If, as Christophers argues, the financial sector plays a decisive role in determining whether energy transition takes place, it follows that an understanding of the shape of contemporary finance capital is imperative for environmental activism. For this reason, Stephen Maher and Scott Aquanno’s new book The Fall and Rise of American Finance: From J. P. Morgan to BlackRock should be required reading for climate justice militants, even if it does not at first appear related to environmental concerns. Maher and Aquanno’s book challenges the prevailing wisdom that the rise of finance in recent decades has catalyzed the decline in manufacturing, the hollowing-out of the corporation, and the collapse of US imperial hegemony. Maher and Aquanno articulate a bracing corrective to this declensionist narrative, showing instead how finance capital was crucial to the rise of US corporate capitalism in the late 19th century, and how it remains integral to the functioning of the capitalist system today.

While the longer history covered by Maher and Aquanno is of great value in understanding the shifting institutional form of finance capital over the last century, their discussion of the new financial model that evolved after the 2008 financial crisis is of particular interest. Amid the meltdown provoked by the subprime mortgage crisis, state regulators tried to build systemic stability by orchestrating a massive consolidation in the US banking system, which is now dominated by four megabanks: JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. As a recent exposé revealed, each of these institutions has bankrolled the expansion of fossil fuels with hundreds of billions in loans since the signing of the Paris Agreement in 2015. In tandem, Maher and Aquanno argue, state interventions catalyzed a shift in financial power away from banks and into massive asset management companies like BlackRock, Vanguard, and State Street. Maher and Aquanno demonstrate that these institutions have accumulated ownership power on an unprecedented scale. BlackRock, for instance, is a majority owner of nearly every major publicly traded US company and acts aggressively to ensure that these corporations remain as competitive and lucrative as possible. In the United States today, in other words, finance and industrial capital are more interwoven than ever before. If financial capital has outsize power in determining which renewable energy projects get funded and built, this is because asset management companies have historically unprecedented power to shape industry in general in the US and beyond.

If, following Christophers’s The Price Is Wrong, we are to conclude that energy transition is not happening because renewables are not profitable enough, then it is surely the evolving shape of finance capital as discussed in Maher and Aquanno’s The Fall and Rise of American Finance that explains the competitive economic pressures that direct capital away from renewables and into fossil fuels. Just to take one example, gargantuan asset management company BlackRock has refused to divest its massive portfolio in fossil fuels, including coal, the dirtiest of them all.

If the idea that bankers are deciding the fate of the planet is horrifying, perhaps even more upsetting is the hollowness of the energy transition. This term, much-used by energy activists, is predicated on the idea that increasing renewables diminishes fossil fuels. On some level, this makes sense; after all, no politician is going to be willing to shut off fossil fuel production until it’s clear that there’s another way to keep the lights on, to keep people warm in winter, and to get them to work on time. The news seems to be good on this front. We constantly hear from watchdog organizations like the International Energy Agency that renewable energy is not only growing but also constitutes an increasingly larger proportion of overall energy generation. Yet, as activist Peter Gelderloos has put it, the assumption seems to be that energy production is like a pie: roughly one-third of the pie currently consists of clean power, while the other two-thirds are derived from dirty energy; thus, if we expand the clean portion of the pie, it seems to follow that the dirty section will necessarily shrink. But energy generation is not static like a pie; in fact, it is growing massively. While some of that growth is made up of renewables, a lot of it also comes from fossil fuels. While renewables may even be growing in relative terms in relation to fossil fuels, fossil fuel–derived energy is growing in absolute terms. This is a problem since any additional carbon pollution in the atmosphere is incredibly dangerous at this point in our climate history.

Rich nations like the United States and United Kingdom are, to an important extent, culpable here since they are currently unleashing a massive surge in new oil and gas exploration that will generate nearly 12 billion tons of planet-frying emissions. However, as Christophers explains, one of the main reasons for the increase in fossil fuels is that the countries in which growth in electricity demand is concentrated are not relatively developed ones like the US but fast-growing nations in the Global South. In these countries, dirty fuels supply most of the new generation capacity: coal generates almost two-thirds of the energy in China, for instance, and almost three-quarters of India’s electricity.

Although Christophers does not discuss this in detail, these countries’ energy policies are animated to a notable extent by a rhetoric of anti-colonial nationalism. They and their citizens have, the argument goes, just as much right to electricity and the economic development that it fuels as the core capitalist nations have. The economic development of the world’s wealthy countries has been fueled by burning fossil fuels, and they have, as a result, colonized the atmosphere over the last two centuries. Core capitalist nations continue to maintain a global economic system that imposes chronic debt and fiscal incapacity on poorer nations. This unjust global system makes the cost of finance for new renewable energy installations far higher than that for dirty-energy infrastructure. Renewables will never be developed under these conditions. Christophers cites by way of example the fact that less than one percent of global investment in renewable energy went to Sub-Saharan Africa, reflecting what he rightly calls “punitive capital costs” that are rooted in colonial histories. If the rich nations continue to refuse to provide significant subsidies to poorer nations for the development of renewables (a form of climate reparations), then the ruling elites in these poorer nations will develop their electric grids using the cheapest and dirtiest sources of power available.

The ominous upshot of all this is that hard-fought victories like the passage of the Inflation Reduction Act in the United States are relatively ineffectual given the increasing buildout of dirty energy on a global scale. As nations in the Global South undergo industrialization, urbanization, and population growth, their electricity consumption is slated to grow at jaw-dropping rates. By way of example, Christophers discusses Bangladesh, whose population is predicted to increase by 20 percent by 2050, and whose per capita electricity demand is projected to be 20 times higher in 2050 than in 2014. The International Energy Agency envisages global electricity consumption doubling by 2050—a conservative estimate, as the example of Bangladesh suggests. But even this conservative figure would require a twentyfold increase in solar capacity and an elevenfold increase in wind power—which would equate, Christophers explains, to the installation of 600 GW of solar and 340 GW of wind every year from 2030 to 2050. To put this in perspective, the United States added a total of only 33.8 GW of all renewables in 2023.

The picture is sobering, to put it mildly. Yet it is not entirely bleak. Christophers’s book does not discuss at great length the countries in which energy transition has been notably successful. While they may be relative outliers, it is surely important to highlight some of the reasons for their success if we are to retain a sense of political possibility, not to mention hope. Countries that have undergone rapid and impressively sweeping decarbonization of their electric grids include obvious candidates like Scotland but also nations in the Global South such as Kenya, Costa Rica, and Paraguay. The latter two nations derive clean electricity from hydro rather than solar or wind, which means that they are somewhat anomalous given that the vast majority of new renewables development is in solar, wind, and, to a much lesser extent, geothermal power. Nevertheless, these nations offer interesting lessons about the innovative balances of community-based and utility-scale public power that are likely to be necessary for successful energy transition. They also underline how important genuine energy democracy and popular sovereignty will be to win public acceptance and support for the shift to renewables. How countries such as these have fought to decarbonize is an important story that needs to be told.

Despite their apparently divergent topics, Christophers’s and Maher and Aquanno’s books can be seen as complementary analyses of some of the most pressing political, economic, and ecological issues of our age. While they offer brilliant anatomies of the many obstacles to democratizing not only energy provision but also other sectors of the economy, they provide mere glimmers of what an alternative public pathway might look like. In the closing pages of their book, for example, Maher and Aquanno argue for “connecting democratic workplaces and community financial institutions to a financial system run as a public utility by the state.” This is a suggestive and exciting goal, but how do we get from the current oligarchic system to such a democratized form of finance? And how would such a public or common bank be run in a genuinely democratic manner?

Similarly, Christophers alludes to the Public Power NY campaign as an important effort to challenge the market orientation of policymaking in the energy sector, but he does not unpack the specific strategies adopted by PPNY over the last five years. Undeniably, the economic and political arguments he makes about the reasons for the failure of the energy transition are extremely useful politically. Knowing that the bankers are consigning our world to the bonfire is enough to piss anyone off. But, as our campaign has learned, winning public power also takes a lot of careful and time-consuming organizational and ideological work.

The public power campaign built a diverse and geographically broad coalition of groups to fight for energy transition. We built power among legislators in New York but also among community groups and in the streets. And we fought hard to help people understand that energy is a political issue. The US energy grid is one of the largest machines ever built by human beings, and yet it is largely invisible to most people. Few of us think about where our power comes from when we flick on the lights. In fact, here in New York City, relatively few people understand that they get their power from a private corporation rather than a public utility. Simply making our energy infrastructure visible is a key fight for the movement.

The challenge we face is to tear up and discard an old dirty-energy system that is deeply interwoven in our everyday lives, and even in our sense of who we are, while also providing alternative employment to the people who work in these planet-destroying but usually well-paying jobs. At the same time, we must mobilize people around the notion that clean energy infrastructure is a public good, a vital part of the commons like water and clean air, that it is a collective good that should be managed in a democratic and equitable manner. This fight for the energy commons is perhaps the great challenge of our era.

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Featured image: Paul Strand. New York [Wall Street], 1915. Getty Museum (93.XB.26.50.2). CC0, getty.edu. Accessed August 2, 2024.